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Some students consider buying property over renting

BY RISHABH R. JAIN | OCTOBER 19, 2011 7:20 AM

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Mike Rohr decided buying a house would be cheaper — or even profitable — after one semester renting an apartment and paying $450 a month.

And as local real estate sees an increase in buyers, some students have considered purchasing houses instead renting.

"The way it's with mortgage rates right now, especially if your parents have a decent credit score, mortgage rates are cheaper than rentals on most apartments," said the second-semester University of Iowa freshman.

His parents suggested he buy instead of renting, which he did with the help of his grandparents. Rohr, 21, pays $400 a month on his mortgage.

According to the website apartmentratings.com, rental prices nationally on single-bedroom apartments have seen a 14.55 percent increase since 2010.

Rohr said he intends to hold onto his home even after he graduates, making a profit by renting it out or selling it.

As mortgage rates decrease, more people look to purchase property all over the country.

According to HSH.com, 15-year fixed rate mortgages have gone down from about 6 percent in October 2008 to just over 3 percent in September.

A report by the National Association of Realtors said housing sales have increased 18.6 percent since August 2010. Throughout the Midwest, housing sales have seen a 30.1 percent increase since that time.

Iowa follows that trend.

"In the state, the increase in sales of housing is up 20 percent from what it was last year at this time, while the actual sales price of housing is down by about 1 percent," said John Marshall, 2012 president-elect of the Iowa City Area Association of Realtors.

Marshall said though official numbers are being solidified, Iowa City has also seen a relative increase in sales.

The area also saw a relative increase in housing sales during the post-economic slump, Marshall said.

And one economic expert said efforts made by the Federal Reserve have encouraged spending, making it a good time to buy property.

Hennadige Thenuwara, a UI economics lecturer, said the post-economic-downturn interest rates continue to decrease because of "expansionary monetary policies" — more money in the market along with low interest rates — put in place by the Fed.

"It wants to push the long term interest rates down, so that there will be greater demand for long-term mortgages and loans, which will encourage spending," Thenuwara said, who has experience with central banking as a former assistant governor for economic and price stability at the Central Bank of Sri Lanka.

The Fed is trying to increase the purchasing power by pursuing monetary policies that increase the money supply and lower long-term interest rates, Thenuwara said.

Parents with several students in college are also considering buying property.

Parents of UI students Sana Irshad, 22, and Hiba Irshad,19, bought them a condo in downtown Iowa City in 2009, despite the high mortgage rates.

"My older sister was going to start at law school at the University of Iowa, and my parents were tired of paying rent for apartments, which are such a rip-off. So they decided to invest in something as they knew their daughters were going to be in Iowa City for more than four years," Sana Irshad said, noting that her younger sister has two more years at the UI. Following her graduation, her parents intend to sell the condominium.


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